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Saturday, April 20, 2024

POGO revenues subject to a 5% franchise tax, says Dominguez

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Offshore gaming operators based in the Philippines are subject to local tax laws, according to the Department of Finance.

These include Philippine offshore gaming operators or those that employ foreign nationals in the country, handle the recording and live streaming of online games and perform IT support services, it said.

The department and the Office of the Solicitor General, however, said foreign-based online casino operators who derive revenues from bets and payouts from gamblers outside the Philippines were not covered by local taxes.

Finance Secretary Carlos Dominguez

Solicitor-General Jose Calida said in a letter to Finance Secretary Carlos Dominguez that the POGO industry regulated by the state-run Philippine Amusement and gaming Corp. has two types of service providers”•the local-based and the overseas-based companies.

Dominguez agreed with  Calida that, “if the POGO [gaming operator] located outside the country caters to foreign gamblers, then it is not subject to tax in the Philippines.”

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“However, the service provider of the POGO located in the Philippines through workers/employees here, is subject to tax and VAT [value-added tax] on its fees charged to the non-resident POGO,” Dominguez said.

Dominguez said revenues of Philippines-based POGOs are subject to 5-percent franchise tax.

Calida said there was a common misconception that POGOs are all Philippine service providers.  He said there are also PAGCOR-accredited companies based abroad that handle the betting and payout systems of these online casinos.

Calida said the Philippines-based POGOs sell live-streamed games to foreign-based offshore gaming operators, and the latter collect bets from their pre-registered clients through online platform and earn from such activity.

“We clearly defined in our legal opinion that based on the rules and regulations for Philippine offshore gaming operations promulgated by PAGCOR, the POGOs we referred to as not subject to income tax are the foreign-based POGOs,” Calida told Dominguez.

“We further stated that gaming operations conducted by the Philippine service providers and subscribed to by the foreign-based POGOs are merely cost centers as far as the latter are concerned,” he said.

“Ultimately, a foreign-based POGO’s source of income is the placement of bets on its online betting facility”•which are all derived from sources outside the Philippines,” Calida said, hence, this “income from sources outside the Philippines is not subject to tax.”

Calida said the OSG never stated and inferred in any legal opinion that all POGOs and their employees could not be taxed.

“It bears stressing that Philippine service providers and local-based POGOs are subject to Philippine taxes on income derived from sources within and without [outside] the Philippines,” Calida said.

Calida said the Bureau of Internal Revenue “is the agency vested with the power to interpret tax laws.”

He said the OSG could also render legal opinion to fulfill its mandate as the statutory counsel of government and all its departments, bureaus, agencies and instrumentalities.

“When requested by our client agencies for legal opinion on matters requiring clarification, we are bound under the law to perform our mandate,” Calida said.

“The OSG affirms its full support to the efforts of the BIR and DOF to tax POGOs and their employees in the country,” he said.

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